Entrepreneur

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EXECUTIVE SUMMARY

EVERYBODY’S DREAM For some, living in SA means making their mark in the land of opportunity. It’s certainly a country whose workforce is increasingly turning away from the “nine to five” office routine in favour of a stint at being their own boss.EPIC FAIL The statistics are still frightening: one in three businesses will fail in their first 18 months of operation. You have to plan your success – if you don’t, the future for your small business won’t look so rosy.To read the full version of this story, go to page 66 of the May-June 2010 issue.

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HOW ENTREPRENEURIAL IS SA?
There’s no denying that entrepreneurs in many different industries are making good in cities like Cape Town – but what about the rest of the country?
BY CB SPENCER

There are pockets of great entrepreneurial activity in SA, says Dr Robin Stead, CEO of the South African Institute for Entrepreneurship. “The Global Entrepreneurship Monitor [GEM] report listed cities in relation to their entrepreneurial activity, and Cape Town was top of the list [in SA]. But as a country we aren’t great,” he admits.

In fact, the 2008 GEM report shows that out of every 100 adult Capetonians, an impressive 13 are business owners. The national average is just 7,8 adults per 100. So what’s the Cape doing so right that it’s managing to eclipse traditional business powerhouse, Johannesburg?

Talking to the Mail & Guardian newspaper last year, Mike Herrington, who leads the GEM researchers in SA and is Director of the UCT Graduate School of Business’s Centre for Innovation and Entrepreneurship, was hard-pressed to single out any specific reasons. However, he did point to Cape Town’s youth culture, which attracts young people from around SA and internationally.

“Younger people are more entrepreneurial, specifically between the ages of about 25 and 38,” he said. With a new GEM report due for release later this year, those in the know seem upbeat about the country’s entrepreneurial progress, which hopefully points to a reduction in the critical failure rates of start-up businesses in SA. But, for now, the statistics – both from Statistics SA and reports such as GEM – make dismal reading:

Since 2001, SA’s entrepreneurial performance has lagged behind that of other countries with similar per capita income. Skills and education are significant obstacles to entrepreneurial growth. The GEM report says: “In the 2008/9 Global Competitiveness Report [GCR], SA’s inadequately educated workforce is cited as the most problematic factor for doing business in the country. SA is ranked 45th out of 134 countries overall by the GCR; however, this ranking plummets to 104th in terms of the quality of primary education, 110th for quality of higher education and training (secondary and tertiary level), and a dismal 132nd in terms of the quality of maths and science education.”

Men are 1,6 times more likely to be entrepreneurs than women, says GEM. SMEs and entrepreneurs contribute 40-60% to SA’s gross domestic product. The last eight years have seen an upswing in “opportunity”-based entrepreneurial activity in SA, with the percentage rising to 79% in 2008 vs 21% of entrepreneurship being spurred on by necessity. In 2004, a whopping 45% of SA’s entrepreneurial activity was born out of necessity. So South Africans are spotting the gaps in the market and are opening businesses not for survival, but because of the potential they present.

According to Herrington, writing in Management Today in 2009: “Many more black individuals, in particular, are starting businesses because of opportunity.” It’s a good trend and one worth watching keenly in the years to come.